The gig economy: How is it changing the UK labour market?

Posted on:
12 March 2018

A Changing UK Labour Market

Since the financial crash of 2008 people have sought new opportunities to make money. Increased competition for work has compelled people to come up with new and interesting ways of earning, leading to a complete revolution of the working world as we know it. Zero hours contracts, the sharing economy and most recently the gig economy are now prominent features of our everyday lives. These concepts aren’t new but they are certainly gaining the spotlight in the modern day employment landscape.

The dream of being self-employed is an aspiration for many. The flexibility of being your own boss and working hours to suit your lifestyle seems very appealing. But has the rise of freelance opportunities caused more headaches than happiness?

The reality is that the UK has never seen so many people working on a self-employed basis. Organisations like Uber and Deliveroo have helped many people’s employment dreams come true, but what is the reality?

Increased litigation against businesses offering people occupational independence has brought into question the suitability of these self-employed opportunities. Court cases against Uber and other similar enterprises are setting new precedents in terms of employments rights for individuals, but what does this mean for the UK economy and business owners across the country? We examined the meaning of these terms and the impact that it could have on UK businesses.

What is the gig economy?

The gig economy refers to freelance work commissioned on a short term basis as opposed to permanent contracted employment. Workers get paid for each ‘gig’ they complete, whether it’s food drop offs, parcel delivery or giving someone a ride.

Many of these businesses are harnessing smart phone technology and the power of social media to provide services of convenience and ease. Technology is no doubt changing the workplace as we know it with app based businesses becoming a modern day feature of everyday living.

What are the downsides of the gig economy?

There has been much controversy over this employment trend with many organisations facing legal action regarding employment rights as gig economy workers seem to fall into a legal void. Experts have speculated that there is a risk of a generation that could lose out on pensions; stating that some organisations are getting away with avoidance of paying minimum wage, denying pensions and rejecting holiday rights.

Questions have also surfaced surrounding the classification of certain app based businesses and court cases are setting new precedents in employment law that could alter the shape of the UK’s labour market.

How is the gig economy changing the labour market?

Uber, a key player in the gig economy, has faced numerous court battles and employment tribunals in the UK. Having lost an appeal against a ruling that its drivers should be classed as employees, the rights of workers in this evolving landscape are certainly taking shape.

Uber argued that it was not part of the gig economy and the decision could deprive drivers of the ‘personal flexibility they value’. The court deemed that drivers should be entitled to minimum wage as well as sickness and holiday pay; however it plans to appeal to the UK’s Supreme Court.

This news came soon after a decision was made by Transport for London not to renew its private hire operator licence after 30th September 2017.

How will the gig economy affect UK business?

According to the Office of National Statistics, the rise in the gig economy has seen the proportion of self-employed people rise by 45% since 2001 with over 15% of the UK labour force being classed as self-employed in 2017. Experts have speculated that employment law should be updated to handle the changes and development in the structure of the UK labour market.

In 2017, the government released the Taylor Review of Modern Working Practices, an independent report that looked at the impact of the changing labour landscape in terms of workers’ rights and responsibilities.

What does the Taylor Review recommend?

The Taylor Review sets out a few key recommendations to ensure balance between workers’ rights, those that are self-employed as well as maintaining interest in the UK economy in terms of public revenue. Overall, the review cites ‘a good goal of work for all’ stating that basic principles should apply to all forms of employment and that taxation should be fair across all employment forms.

In addition the paper recognises that technology presents new opportunities but fairness needs to be ensured for those working through these platforms as well as their competitors.

Clearer distinction is needed to pinpoint workers from the self-employed. Firms should support people in the decision making process so individuals can know and exercise their rights, providing protections and stronger incentives for firms to treat ‘dependent contractors’ fairly.

Good management and strong employment relations are essential within any organisation and future work prospects must be realistically attainable, closely related to the importance of being proactive in workplace health.

Finally the Taylor Review recommends sectoral strategies to ensure people do not face insecurity and are not stuck at the living wage minimum but can progress in their current and future work.

These suggestions seem logical and reasonable but the practicality of implementing these changes could take years to achieve. In the meantime new technologies and ways of working could emerge calling for further reform and change to the rights of workers and employers alike.

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